Insolvency proceeding: JSW Steel bid for Bhushan Power is lenders’ top pick

The Sajjan Jindal-led steelmaker has offered to pay Rs 19,350 crore to lenders of Bhushan Power against their total outstanding of Rs 47,000 crore and Rs 350 crore to the operational creditors in lieu of their admitted claims of Rs 700 crore.

Insolvency proceeding: JSW Steel bid for Bhushan Power is lenders’ top pick

Lenders to Bhushan Power and Steel have zeroed in on JSW Steel as the most preferred bidder to take over the near-bankrupt company. The Sajjan Jindal-led steelmaker has offered to pay Rs 19,350 crore to lenders of Bhushan Power against their total outstanding of Rs 47,000 crore and Rs 350 crore to the operational creditors in lieu of their admitted claims of Rs 700 crore.

Bankers present at the 13-hour-long meeting of the committee of creditors (CoC) held on August 14 said JSW Steel’s bid was higher by Rs 2,700 crore than that of Tata Steel and better by Rs 850 crore compared with the UK-based Liberty House’s cumulative offer of Rs 18,850 crore. Bhushan Power and Steel owed lenders, led by Punjab National Bank, Rs 47,000 crore.

The bankers said Tata Steel did not revise its original offer of Rs 16,500 crore for financial creditors though it committed to pay operational creditors Rs 500 crore. Liberty House’s proposal to pay Rs 18,500 crore to the financial creditors, sources said, was exclusive of the commitment to pay Rs 350 crore to the operational creditors.

As per the Insolvency and Bankruptcy Code (IBC) rules, 66% of the lenders need to approve a resolution plan for it to go through. Thereafter, the resolution professional (RP) needs to submit the approved plan to the National Company Law Tribunal (NCLT) for its approval before it takes effect.

However, in the Bhushan Power and Steel matter, lenders were asked by the appellate tribunal on August 1 to decide on the most appropriate resolution plan taking into consideration their feasibility. They were also directed to leave the decision in a sealed cover until the National Company Law Appellate Tribunal (NCLAT) passes an order on whether the late bid submitted by Liberty House initially is valid or not.

Banking sources said the CoC will on August 17 submit all three received bids to the NCLAT for its direction before proceeding further. The Supreme Court had on August 10 directed the NCLAT to “hear and pass final order as expeditiously as possible” and also asked the lawyers not to seek any adjournment on August 17, the day the appellate tribunal is slated to hear the case.

Should JSW Steel eventually win BPSL, the additional 3.1 million tonnes per annum (mtpa) steel-making capacity would take its total capacity to over 22 mtpa. That would catapult it to the position of India’s largest steel company, outpacing Tata Steel. JSW Steel has already taken over another insolvent firm, Monnet Ispat, through the IBC route. Monnet has an annual capacity of 1.1 mtpa.

JSW Steel’s offer to pay out 41% of dues to Bhushan Power’s lenders is the second best offer by any acquirer firm so far after the initiation of the IBC-led insolvency process.

Tata Steel’s offer to Bhushan Steel’s lenders has been the best since it involved a haircut of just 32%. Lenders to Adhunik Metaliks had to take the highest 92% haircut followed by 75% by the lenders of Monnet Ispat.

The corporate insolvency resolution process has been successful so far for five large companies — Bhushan Steel, Electrosteel Steels, Monnet Ispat, Adhunik Metaliks and Amtek Auto. The approval of Bhushan Power’s resolution process will take the tally to six among the “dirty dozen”identified by the Reserve Bank of India last year.